The New Overtime Regulations, What They Mean For You
Cliff Ennico
cennico@legalcareer.com
Last week (August 23, 2004 to be exact) the U.S. Department of Labor#146;s new overtime rules went into effect. The new rules have generated tons of publicity and comment in the press, but I suspect last week#146;s deadline still took a lot of business owners by surprise.
If you have any employees and use a payroll service, chances are you#146;ve already been notified of the changes by the payroll service and have taken steps to comply with the new rules. If you don#146;t use a payroll service for your low-wage employees (shame on you), or if you use a payroll service and they haven#146;t notified you of your obligations under the new rules (shame on them), chances are you#146;ve already made a couple of mistakes and will have to fix them . . . pronto.
#147;You can#146;t always rely on your payroll service to stay on top of these things,#148; warns Rob Wilson, president of the Employco Group (
www.employco.com
), a Chicago-based professional employer organization (PEO) that handles payroll and benefits for hundreds of small businesses nationwide. Wilson explains that #147;basically, a payroll service just crunches the numbers you give them. It#146;s always your responsibility to comply with federal and state labor laws when you have employees.#148;
According to Wilson, here#146;s how the new rules work:
if you have an employee who is #147;exempt#148; from the overtime rules (such as a part-time lawyer, staff accountant, or other professional), you probably don#146;t have to pay overtime if the person works more than 40 hours a week #150; keep in mind, though, that entire books have been written about when an employee is #147;exempt#148;, and any doubts in this area should be resolved in favor of paying overtime to the employee;
for all other employees (called #147;nonexempts#148; in overtime lingo), if they are making at least $450 a week or $23,660 a year, you do not have to pay overtime if they work more than 40 hours a week #150; again, you or your employment attorney will need to review the employee#146;s job status to make sure they are truly #147;nonexempt#148;;
for all #147;nonexempt#148; employees making less than $450 a week or $23,660 a year, you are required to pay overtime if they work more than 40 hours a week;
special rules apply to computer professionals #150; if you hire computer technicians (not software developers or programmers, who are considered #147;exempt#148; under the rules), for example #147;rent-a-geeks#148; who run around fixing personal computers in people#146;s homes, they must make at least $455 a week or $27.63 an hour before you are no longer required to pay them overtime if they work more than 40 hours a week.
Sounds simple, right? Then, why all the fuss? #147;With these new rules, the Department of Labor raised the overtime threshold from $8,060 a year to $23,660 year,#148; says Wilson, #147;which doesn#146;t sound like a big deal until you realize that about 6.7 million salaried workers in the United States earn more than $8,060 but less than $23,660, and will now be eligible for overtime if they work more than 40 hours a week.#148; In fact, there#146;s been some grumbling in Congress that the new rules don#146;t go nearly far enough . . . but then it#146;s an election year, isn#146;t it?
Let#146;s say you have an employee making $20,000 a year, and you really don#146;t want to pay them overtime or do the paperwork involved. What are your options? #147;I think most employers, both large and small, will simply raise the employee#146;s salary to bring it over the $23,660 threshold so they don#146;t have to pay overtime,#148; says Wilson.
If you are tempted to terminate the low-wage employee and put them back to work as an #147;independent contractor#148; to avoid having to comply with the new rules, Wilson strongly advises that you resist the temptation. #147;The Internal Revenue Service is really cracking down on that right now,#148; he warns, #147;and putting a former employee on 1099 status for essentially the same work they were doing previously will be a screaming red flag to the IRS that you are ripe for audit.#148;
If you have questions about the new rules that your payroll service can#146;t answer, you need to talk to a lawyer specializing in labor and employment problems. To find one in your area, go to
www.findlaw.com
or
www.law.com
and click on the #147;search for lawyer by specialty#148; button.
Cliff Ennico (
cennico@legalcareer.com
) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at
www.creators.com
. COPYRIGHT 2004 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com
